Consideration and the levy of export tax

When goods are sent abroad for display in exhibitions or for approval of customers, the element of consideration (payment or benefit) is absent at the time of export. Hence, the Central Board of Indirect Taxes and Customs (CBIC) has said, these would not attract Integrated Goods and Services Tax (IGST). Only when the said goods are approved and sold does the actual supply takes place and GST become payable.

This could pose some practical difficulties for exporters. Most of them treat all such export as zero-rated and send the goods without payment of IGST, under a legal undertaking (LUT) or on payment of IGST under a refund claim. They follow this procedure for export of samples, to consignment agents, for display in exhibitions, on an approval basis, free replacement and so on. In case the goods are not sold, they bring these back on payment of IGST and surrender any incentive taken at the time of export. 

The latest clarification means exporters must remove such goods under a delivery challan, not an invoice. The supply would be deemed to have taken place on expiry of six months from the date of removal, if the specified goods are neither sold abroad nor brought back within this period. If sold abroad, fully or partially, within these six months, supply is effected in respect of the quantity so sold, on date of sale. A tax invoice can be issued when the supply takes place either by sale or when the unsold goods are not brought back within six months, says CBIC. 

Since the activity of sending or taking goods out of India where consideration is absent is not zero-rated supply, the sender of goods cannot export on payment of IGST under a refund claim. However, the sender may prefer a refund claim even when the specified goods were sent or taken out of India without execution of a bond or LUT, if otherwise eligible for a refund under sub-section (3) of section 54 of the CGST Act, read with sub-rule (4) of rule 89 of the CGST Rules, in respect of zero-rated supply after he has issued the tax invoice on the relevant dates.  The refund claim cannot be preferred under rule 96 of the CGST Rules, as the supply is taking place after the goods had already been sent or taken out of India earlier. 

The circular, issued by the GST wing of CBIC, also prescribes suitable records to be maintained. The Customs wing of CBIC has since issued a circular to clarify on various issues regarding the exemption notification for re-import of goods which had been earlier exported, either for participation in an exhibition or on a consignment basis.

Now, exporters should review all situations where goods are sent abroad without any payment made or to be made, whether in money or otherwise, in respect of, in response to or for the inducement of the supply of goods, whether by the recipient or any other person. CBIC should also review whether such highly technical interpretation of the provisions should take precedence over ease of doing business. 

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